Take advantage of these 3 strong purchases

U.S. consumers returned to stores this holiday season as overall sales starting November 1st to December 24e increased 8.5% from 2020. A report from Mastercard SpendingPulse showed department stores were up 21% from last year and up 11% from levels before the pandemic.

Sales jumped across the board, with consumers spending more money on clothing, jewelry, and electronics. Clothing sales soared 47%, while jewelry sales jumped 32% and electronics rose 16% from 2020 levels. Supply chain issues plaguing the economy worldwide have prompted consumers to start shopping earlier than usual. Mastercard has observed this trend from last year as the pandemic has shifted some purchases to previous months.

Online shopping also saw double-digit growth, up 11% from last year. The share of overall holiday sales coming from e-commerce has grown steadily over the past decade, now accounting for around 21% of all holiday sales.

Retailers have been among the biggest beneficiaries of the spike in spending. The Zacks Retail – Apparel and Footwear industry group is ranked in the top 18% of 253 industry groups and contains the three companies which we will discuss below. This industry group is part of Zacks’ Retail and Wholesale business, currently ranked # 3 out of 16 industries.

Zacks Retail – Apparel and Footwear Industry Group exhibits favorable characteristics including an average P / E of 12.29 as well as a projected EPS growth of 126.92%, well above the 21.15% of S&P . Quantitative research has shown that about half of future appreciation in a stock’s price is due to its industry consolidation.

As investors, we want to target stocks that belong to high performing industrial groups. Given that this industry group is in the top 50% of all industries ranked by Zacks, we expect it to outperform the market in the next 3-6 months. Let’s take a look behind the curtain at three individual stocks within this industry group that have a Zacks # 1 Strong Buy ranking and all outperform the market.

The Loop, Inc. (BKE)

The Buckle is a leading retailer of casual clothing, footwear and accessories for fashion-conscious young men and women in the United States. The company markets jeans, tops, sportswear, outerwear and footwear under a multitude of brands and private labels. Founded in 1948 and headquartered in Kearney, NE, Buckle operates 443 retail stores in 42 states.

BKE has exceeded profit estimates in each of the past five quarters and is averaging 42.84% over the past year. The stock is trading at an attractive valuation (8.59 P / E forward) while increasing over 68% over the year. BKE recently announced November EPS of $ 1.26, a 26% positive surprise from consensus.

Buckle, Inc. The Price, Consensus, and Surprise EPS

Buckle, Inc. The Price, Consensus, and Surprise EPS

Consensus for current-year earnings among analysts covering BKE has risen 12.26% in the past 60 days. Zacks’ consensus estimate for the BKE EPS now stands at $ 4.76, which represents a 78.95% growth over 2020 earnings. BKE’s next earnings announcement is scheduled for the 11th. Marche, 2022.

Boot Barn Holdings, Inc. (BOOT)

Boot Barn Holdings is a lifestyle retail chain and operates specialty retail stores nationwide. The company offers footwear and workwear, including boots, jeans, western shirts, cowboy hats, belts, buckles and jewelry. Founded in 1978 and headquartered in Irvine, Calif., BOOT operates 275 stores in 36 states. The company also sells its products through its e-commerce websites, including bootbarn.com; sheplers.com; and countryoutfitter.com.

BOOT has met or exceeded earnings expectations in each of the past six quarters. The company recently reported EPS of $ 1.22 in October, a surprise of + 29.79% from consensus. BOOT has generated an average positive surprise of 35.29% over the past four quarters, contributing to the stock’s 180% return this year.

Boot Barn Holdings, Inc. Price, Consensus, and EPS Surprise

Boot Barn Holdings, Inc. Price, Consensus, and EPS Surprise

Boot Barn Holdings, Inc. Price, Consensus, and EPS Surprise

What the Zacks model reveals

Zacks Earnings ESP (Expected Surprise Prediction) seeks to find companies that have recently seen positive earnings estimate review activity. This more recent information has proven to be an accurate predictor of the future, giving investors a head start during earnings season. By combining a Zacks Rank # 3 or better, stocks produced a positive surprise 70% of the time according to our 10 year backtest.

With a Zacks # 1 ranking (strong buy) and earnings ESP of + 0.91%, our proprietary model predicts an increase in earnings for BOOT for the upcoming earnings announcement.

Analysts covering BOOT agree with recent earnings revisions, increasing their estimates by 25.68% in the past 60 days. Zacks’ Consensus Estimate for FY2022 BPA now stands at $ 5.53, which translates to a growth of 188.02% over last year. BOOT is expected to release its next quarterly earnings report on January 24e.

Tilly’s, Inc. (TLYS)

Tilly’s operates as a specialty retailer in the action sports industry, selling nationwide clothing, footwear and accessories for young men and women. Tilly’s merchandise includes tops, outerwear, stockings and dresses. TLYS also sells backpacks, hats, sunglasses, handbags, watches and jewelry. Founded in 1982 and headquartered in Irvine, Calif., Tilly’s operates 238 stores in 33 states. The company also sells its products through its website, tillys.com.

Trading at a relatively undervalued forward P / E of 7.16, TLYS has beaten earnings estimates in each of the past five quarters. The company has a surprise average earnings over the past four quarters of 296.16%, supporting the stock’s 120% return this year. TLYS recently reported EPS of $ 0.66 earlier this month, a 100% surprise from consensus.

Tilly’s, Inc. Price, Consensus, and Surprise EPS

Tilly's, Inc. Price, Consensus, and Surprise EPS

Tilly’s, Inc. Price, Consensus, and Surprise EPS

Analysts covering TLYS have increased their EPS estimates for fiscal 2022 by 25.88% in the past 30 days. Zacks’ consensus estimate is now $ 2.14, a phenomenal growth rate of 5450% from last year. TLYS must report its income on March 10e, 2022.

All three of these retailers took advantage of the holiday spending boom and hope to continue the good momentum as the new year approaches.

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